Switzerland and Liechtenstein WT/TPR/S/141
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IV.  trade policies by sector

(1)  Introduction

  1. Switzerland and Liechtenstein have followed a piecemeal approach to their trade reforms. The nature and pace of implementation have tended to vary according to sector. Important reforms have liberalized market access considerably in several manufacturing and services subsectors. The bilateral mutual recognition agreement with the EU, and amendments to competition legislation and to sectoral regulations (e.g. on pharmaceutical products and motor vehicles) have further liberalized the Swiss manufacturing sector since 2000, at least as far as Swiss-EU trade is concerned. In Liechtenstein, the liberalization reforms in manufacturing and services have largely been spurred by its 1995 EEA membership.
  2. Several Swiss and Liechtenstein multinational companies are among the world's largest, and many competitive and innovative small and medium-sized export-based companies have developed with little or no government assistance. The main exceptions are the electricity and gas subsectors, and certain industries with low productivity, notably in food manufacturing, certain construction products and services, or salt production. Despite relatively high tariff protection, the textiles and clothing and (particularly) the footwear industry, have recorded the strongest contraction in value added in Swiss manufacturers over the past decade.
  3. In agriculture, implementation of reforms has slowed since 2000. Switzerland (and through it Liechtenstein) continues to rank top among the OECD countries in terms of government support to agriculture, despite the ongoing gradual move away from price support towards direct payments. High border protection has contributed to maintaining domestic food prices high by international comparison. The heavy reliance of food industries on incentives reinforces their effective tariff protection through strong positive tariff escalation. Swiss export subsidies, when they were last notified in 1998, continued to be the second highest among WTO Members, and were likely to distort world markets of mainly cheese.
  4. Switzerland and Liechtenstein have pursued the liberalization of services; the reforms have gone further than their multilateral commitments in certain areas, such as financial services. Certain Swiss insurance services, however, remain under monopoly. The supervision of financial services is presently under review in both Switzerland and Liechtenstein, with a view to regrouping their regulation under a single supervisory authority in each country. In addition, Liechtenstein has adapted its legislation to better combat money laundering. In telecommunications the positive effects of the liberalization for consumers are tangible; prices for telephone calls have declined and are now relatively low, compared with the average tariff in OECD countries and despite Swisscom's continuing de facto monopoly over certain telecommunications services. The number of postal services that remain under state monopoly in Switzerland and in Liechtenstein has been further reduced.

5.  The agreement on land transport with the EU has led to further liberalization of market access to Switzerland's road and rail transport services, albeit on a reciprocal basis. As trade in professional services, and business services in general, relies to a large extent on the movement of physical persons, trade in professional services is likely to be stimulated by the substantial opening of Switzerland's labour market to EU/EFTA nationals since 2002. The tourism industry has also benefited from the opening of Switzerland's labour market; this is to contribute to reducing the high costs of labour resulting from quotas on the number of work permits granted to foreign workers in hotels and restaurants. Aside from the global air transport crisis, the collapse of the Swiss holding company, SAirGroup, was ascribed to its past expansionary strategy and, to a lesser extent, to the lack of access to the EU market prior to the signing of the recent bilateral agreement on air transport with the EU. Despite the Swiss government subsidies, the creation of a new national airline and the 2002 agreement with the EU, the Swiss air transport subsector has yet to recover from the crisis. Construction services remain isolated from international competition and their costs continue to be high by international comparison.

(2)  Agriculture

(i)  Overview

  1. Agricultural production in Switzerland and Liechtenstein has continued to record a downward trend. In Switzerland in particular, the gross value of agricultural production was Sw F 9 billion in 2003, down from Sw F 10 billion in 2000 (Table IV.1).[1] Switzerland and Liechtenstein are net importers of agricultural and food (agri-food) products; imports of these products by Switzerland amounted to SwF 8.5 billion in 2001. Main imports are fish, alcoholic beverages, certain meat products, and out-of-season vegetables. Agricultural exports by Switzerland reached SwF 3.5billion in 2001; they comprise mainly processed food products (HS Chapters 20 and 21), sugar, sugar confectionery, cocoa, coffee and their products (HS Chapters 9, 17, 18), tobacco and miscellaneous products (HS Chapters 13, 14, 24), and dairy products (HSChapter 4).[2] Three quarters of imports and two thirds of exports are with the European Union.

Table IV.1

Switzerland: agricultural production, 1997-03

(Sw F million)

Branch / Value
1997 / 1998 / 1999 / 2000 / 2001 / 2002 / 2003 a
Cereals
Potatoes
Sugar beet
Vegetables
Fruits
Plants and flowers
Wine / 771
229
162
509
532
916
336 / 750
201
155
463
620
952
362 / 624
191
139
444
573
900
401 / 619
207
166
487
658
882
421 / 490
192
137
505
552
819
429 / 513
194
164
535
561
834
407 / 428
178
151
536
534
790
388
Total vegetable production / 5,056 / 4,932 / 4,462 / 4,797 / 4,348 / 4,576 / 4,067
Milk
Bovines
Porcines
Poultry
Eggs / 2,737
1,028
1,227
171
190 / 2,751
1042
1,112
168
190 / 2,508
939
1,033
168
171 / 2,559
1,128
1,081
178
173 / 2,605
932
1,085
180
175 / 2,544
963
1,045
192
185 / 2,360
1,016
1,082
202
184
Total animal production / 5,453 / 5,366 / 4,905 / 5,199 / 5,065 / 5,018 / 4,933
Total agricultural production / 10,510 / 10,298 / 9,367 / 9,995 / 9,413 / 9,593 / 9,000

a Provisional figures.

Source: OFAG (2003), Rapport annuel, Tableau 15.

  1. Switzerland formulates agricultural policy for the customs union.[3] Public expenditure on agriculture is considerable compared with the value added generated by the sector. The objectives of the policy, unchanged since 2000, are to ensure the conservation of natural resources and the maintenance of rural areas, as well as a decentralized use of the territory; to allow rural enterprises that meet "sustainable development" and "economic performance" criteria to earn, on average, an income that is comparable to that earned by the population working in other sectors of a same region[4]; and to "contribute substantially to the security of domestic food supplies", a constitutional priority generally understood as a high level of self-sufficiency (domestic production relative to total domestic consumption).[5] This last objective, given geographical and climatic constraints, applies only to goods that are produced domestically, and is pursued under relatively high market access barriers. As a result, the self-sufficiency ratios average about 45% for products of vegetable origin, and 95% for animal products; they have remained broadly unchanged since 1995 (TableIV.2).[6]

Table IV.2

Switzerland: self-sufficiency in basic food products, selected years*

(Per cent)

Product / 1991 / 1995 / 1999 / 2000 / 2001 / 2002
In digestible calories:
Cereals for bread / 126 / 134 / 99 / 89 / 102 / 82
Cereals for fodder / 62 / 75 / 70 / 76 / 69 / 67
Total cereals / 65 / 68 / 62 / 62 / 64 / 59
Edible potatoes / 107 / 99 / 82 / 102 / 93 / 94
Sugar / 44 / 42 / 58 / 63 / 47 / 61
Fat and vegetable oils / 24 / 20 / 18 / 19 / 20 / 20
Fruits / 60 / 71 / 68 / 80 / 71 / 76
Vegetables / 53 / 55 / 52 / 51 / 53 / 56
Milk for consumption / 97 / 97 / 97 / 97 / 97 / 97
Butter / 91 / 93 / 88 / 85 / 88 / 98
Cheese / 137 / 129 / 123 / 116 / 122 / 113
Milk and dairy products / 110 / 110 / 111 / 110 / 107 / 107
Veal / 99 / 97 / 95 / 92 / 98 / 98
Beef / 94 / 92 / 88 / 85 / 96 / 89
Pig-meat / 99 / 98 / 92 / 92 / 96 / 95
Sheep / 44 / 46 / 46 / 35 / 39 / 41
Poultry / 46 / 51 / 42 / 43 / 40 / 43
Total meat / 80 / 79 / 70 / 68 / 71 / 70
Eggs and products thereof / 44 / 45 / 47 / 48 / 47 / 42
In digestible energy:
Vegetable products / 42 / 42 / 40 / 47 / 40 / 45
Animal products, gross / 97 / 96 / 95 / 91 / 94 / 94
Total products, gross / 62 / 61 / 58 / 62 / 58 / 61
Total products, net / 58 / 57 / 54 / 55 / 53 / 56
In value:
Total of food products / 72 / 71 / 63 / 63 / 62 / 63

* Self-sufficiency is defined as the ratio of domestic production to the sum of production plus imports less exports.

Source: Information provided by the Swiss Authorities.

  1. Switzerland (and through it Liechtenstein) ranks top among the OECD countries in terms of government support to agriculture, both as a share of gross receipts from production and on a per capita basis. In 2003, Switzerland provided support to producers (Producer Support Estimate (PSE)) equivalent to 74% of gross receipts from agricultural products, almost two and a half the average of 31% for OECD countries, and nearly twice the level in the European Union, Switzerland's main trading partner (TableIV.3).[7] The PSE remained broadly unchanged between 1995 and 2001, but has increased in recent years mainly because of the Swiss franc's appreciation vis-à-vis the euro and other major currencies, which resulted in a decline in equivalents in Swiss francs of prices set in foreign currencies, and a corresponding increase in border protection, as customs tariffs are specific. The OECD's Consumer Support Estimate for Switzerland is also among the highest of OECD countries, at 61% (in 2003) compared with an OECD average of 24%.
  2. There has been a gradual reorientation of farm assistance since 1993, from price support measures towards direct payments. The focus was on abolishing guaranteed and administered prices, separating price policy from income policy, and increasing reliance on compensatory direct payments. Under the "Agricultural Policy 2002" (AP 2002) initiative, adopted by the Swiss Parliament in April 1998, further efforts were made to promote "environmental sustainability" and "market-oriented" reforms. Under AP 2002, ecological production conditions were introduced as eligibility criteria for direct payments, and farmers must now comply with "integrated farming" techniques, i.e. specified basic environmental standards (including on pesticide or fertilizer usage) and animal-friendly conditions. In 2003, such techniques were being used on approximately 96% of the land area suitable for agriculture, up from 84% in 2000. In addition, direct ecological payments, such as support for organic farming, increased significantly over the 1999-02 period, but still represent a small part of total support to agriculture (see Tables IV.5 and AIV.1 below). Organic agriculture as such is practised on a modest 11% of farms (10% of land area).[8]
  3. While the authorities consider the ecological objectives of AP 2002 to have been partly met, this has not been the case of market-oriented reforms. Despite a sizeable decrease in producer prices over the past ten years as a result of the reorientation away from price support measures, these remain on average twice as high as in the European Union, and on average three times as high as on world markets. High border protection (mainly by means of prohibitive out-of-quota tariffs and very low tariff quota volumes relative to domestic consumption) to support agricultural production at high costs has contributed to maintaining consumer prices for most food products high by international comparison (TableIV.4), with effects on real incomes (mainly of the poorest segments of the population), as well as on other sectors of the economy, such as tourism.[9] Furthermore, small falls in producer prices have not translated into lower consumer prices, and hence have not reflected the relative improvement in competitiveness of domestic products.[10] As a result, consumers in Swiss border regions continue to rely on cross-border purchases of the most protected products (e.g. meat, alcoholic beverages, dairy products, and vegetable oils) for a large share of their food consumption.[11]

Table IV.3

Producer and consumer support estimates, selected countries 1995-03

1995 / 2000 / 2001 / 2002 / 2003
PSE, all products
Switzerland (euros million) / 5,094 / 4,910 / 4,940 / 5,292 / 4,941
percentage of production / 72 / 72 / 72 / 74 / 74
per capita (euros) / 724 / 684 / 683 / 732 / 683
European Union (euros million) / 100,795 / 96,146 / 99,295 / 100,577 / 108,251
percentage of production / 37 / 34 / 34 / 35 / 37
per capita (euros) / 272 / 256 / 269 / 272 / 293
United States (euros million) / 17,538 / 53,901 / 57,170 / 43,343 / 34,675
percentage of production / 11 / 22 / 23 / 19 / 18
per capita (euros) / 67 / 196 / 203 / 147 / 122
OECD (euros million) / 211,980 / 262,991 / 254,534 / 243,717 / 229,473
percentage of production / 32 / 32 / 31 / 31 / 32
per capita (euros) / 196 / 235 / 226 / 216 / 204
CSE, all products
Switzerland (euros million) / -3,837 / -3,644 / -3,259 / -3,569 / -3,383
percentage of consumption / -66 / -63 / -59 / -62 / -61
per capita (euros) / -545 / -507 / -459 / -493 / 468
European Union (euros million) / -52,223 / -48,585 / -47,963 / -52,299 / -55,450
percentage of consumption / -28 / -27 / -25 / -28 / -30
per capita (euros) / -141 / -129 / -130 / -141 / -150
United States (euros million) / -6,153 / 4,703 / -642 / 6,741 / 7,732
percentage of consumption / -5 / 3 / -0 / 4 / 5
per capita (euros) / -23 / 17 / -0.5 / 24 / 27
OECD (euros million) / -142,172 / -160,374 / -147,178 / -148,400 / -137,168
percentage of production / -26 / -25 / -23 / -24 / -24
per capita (euros) / -131 / -143 / -129 / -130 / -122

Source: OECD, Agricultural Policies in OECD Countries, Monitoring and Evaluation, various issues.